Tuesday, October 2, 2012

Hitting the 401K

Sometimes there is a sense of panic, in, see if you start your credit card bills, is out of control. If you are relatively new in this regard, including credit, you can make a second mortgage. But if the credit card bills, to grow and grow because they are designed to keep doing it, suddenly finds that his house and bet now may be at risk if it pays the bills.It's time for the mountain of debt, you can start knocking on the door of his last remaining resources trying to fight and you must make important decisions. And it is, it's a good idea to try, in cash or borrow money at retirement to get enough money for 401k, become debt. Then decide if it's a good idea is a big gamble, because if you win, you could completely eliminate the debt. But if you lose, because security is your nest egg last year and maybe you wanted to convey to their children as inheritance.

Hitting the 401K to pay off credit card debt is a bad idea for several reasons. The most obvious reason is that retirement tax deferred money if you are in this bill that you can not pay taxes on it. You do not pay taxes for them to try. Add to that the money should remain in reserve until they reach retirement age, though in many cases, do so soon, there is a great pity that you have to pay.

So now, if you withdraw your retirement money to pay his debts or to pay by credit card, you lose a large amount of money penalties and taxes. If you calculate how much can be compared with the interest will be wishing that you could save a salary, which is great, just to get to this money.

The logic of hitting the 401k is that in theory, you will save more money than they had investment interests. But there is some sound logic of these funds for retirement, you can feel. On the one hand, the debt will come and go, but pension funds tend to disappear and never come back. Once collected, pension funds and give the money to credit card debt, the pension is gone. But if you have a way to take care of these credit card debt and come out of retirement only to find it for you and you have a sense of belonging that does not put the blame one of you.

One option is to borrow Edit: 401K and use it as collateral. However, in this case are always just replace the debt of the debt. However, the secured debt is often easier to obtain a favorable interest rate and can be limited such that the rate variable, such as credit card debt. So there is rational to go that route. But if there is an option, you are still a very important part of your financial future on the line so be careful.